Sara Lee 2009 Annual Report Download - page 23

Exit Activities, Asset and Business Dispositions Exit activities,
asset and business dispositions are as follows:
In millions 2009 2008 2007
Charges for (income from) exit activities
Severance $114 $31 $«93
Exit of leased and owned facilities (1) 5 13
Other 1 3–
Asset and business dispositions – (1) (12)
Total $114 $38 $«94
The net charges in 2009 are $76 million higher than 2008 as
a result of higher severance costs related to restructuring actions
taken in the International Beverage and International Bakery
segments. The net charges recognized in 2008 are $56 million
lower than the prior year primarily due to a $62 million reduction in
employee severance costs. The severance costs and other costs
were higher in 2007 because of the implementation of extensive
restructuring plans to terminate employees in all our North American
segments and the International Beverage segment. In 2007, the
corporation also recognized costs to exit leased space in connection
with the relocation of the corporation’s headquarters to Downers
Grove, Illinois.
Impairment Charges During 2009, the corporation recognized a
$314 million non-cash charge primarily for the impairment of goodwill
and other long-lived assets associated with the Spanish bakery
operations and goodwill associated with the North American food-
service beverage operations as both operations were not expected
to generate sufficient profitability to support the remaining goodwill
balances. During 2008, the corporation recognized an $851 million
non-cash charge primarily for the impairment of goodwill associated
with the North American foodservice bakery and Spanish bakery
operations and writedowns of certain other assets in North America.
In 2007, impairment charges of $172 million were recognized and
represent charges for the impairment of goodwill, intangible assets,
fixed assets, and investments held by the corporation. These charges
impacted each of the corporation’s business segments. Additional
details regarding these impairment charges are discussed in Note 3
to the Consolidated Financial Statements, titled “Impairment Charges.”
Receipt of Contingent Sale Proceeds Under the terms of the
sale agreement for its cut tobacco business, the corporation will
receive annual cash payments of 95 million euros through July
2009, contingent on tobacco continuing to be a legal product in
the Netherlands, Germany and Belgium. The U.S. dollar amounts
received in 2009, 2008 and 2007 upon the expiration of the
contingency were $150 million, $130 million and $120 million,
respectively, based upon respective foreign currency exchange
Sara Lee Corporation and Subsidiaries 21
As previously noted, reported SG&A reflects amounts recognized
for actions associated with Project Accelerate, the business trans-
formation program and other significant amounts. These amounts
include the following:
In millions 2009 2008 2007
Transformation costs – IT $«21 $«40 $÷42
Transformation/Accelerate costs – other 18 3 67
Curtailment gain (10) – –
Gain on property disposition (14) ––
Pension partial withdrawal
liability charge 18 ––
Balance sheet corrections (11) – –
Total $«≥22 $«43 $109
Transformation IT costs in 2009 were $19 million lower than the
prior year as 2008 included both software amortization expense and
$25 million of expenses associated with the implementation of new
computer systems. In 2009, $21 million of software amortization
was recognized as part of transformation costs, which was $6 million
higher than the amortization expenses reported in 2008. The year-
over-year increase was attributable to the increasing number of
computer systems that were put into use over the course of 2008
and 2009. The $15 million increase in other transformation/
Accelerate costs was due primarily to transition and contract termi-
nation costs associated with the transition of business support
services to an outside third party vendor as part of a business
process outsourcing initiative under Project Accelerate.
Transformation costs in 2008 were down $67 million from 2007
due to a reduction in costs associated with the corporation’s decision
to centralize the management of its North American and European
operations, which resulted in higher costs being incurred in 2007
for employee relocation, recruitment and retention bonuses in order
to maintain business continuity. These cost reductions were partially
offset by $15 million of computer software amortization expense
related to systems that were put into use in 2008.
In 2009, the corporation entered into a new collective labor
agreement in the Netherlands which resulted in the recognition of
a $17 million curtailment gain, $10 million of which was recognized
in SG&A. In 2009, the North American Fresh Bakery segment
recognized a $31 million charge to establish an estimated partial
withdrawal liability as a result of the cessation of contributions
to a multi-employer pension plan. Of the total charge, $18 million
was recognized in SG&A.
During 2009, the International Beverage segment disposed of a
parcel of vacant land, which resulted in the recognition of a $14 million
gain. The corporation also recognized $11 million of income related
to the correction of balance sheet account errors associated with the
adjustment of certain individually insignificant balance sheet amounts.